This is a pretty common issue on GMAT Sentence Correction.
As any GMAT taker can tell you, the GMAT loves using the word “that”. So when should you use it?
Well, I’ve excerpted the below from my book on GMAT Sentence Correction so that you know.
Now, the word “that” in general denotes a necessary modifier, something that you have to know to understand the meaning of the sentence. So, if someone asks, “Which car is yours?”, you could respond, “The car that has a dent in it is mine.” If you responded, “The car, which has a dent in it, is mine,” it’d be confusing to your reader.
One important thing to note is that a “that” clause can have an entire independent clause inside of it. So, we can say, “He predicted that the beach would be closed and he was right.” Notice how the italicized phrase is an entire independent clause (it can stand on its own), but that doesn’t make the sentence a run on.
The GMAT loves using “that” this way. So, the GMAT prefers, “He crashed the car that his dad had given to him,” to “He crashed the car given to him by his dad.” If you see the word “that”, it’s a good sign for the sentence.
The only time “which” is preferred is when the modifier is unnecessary. This is an issue of context and meaning.
If you’re looking for practice on these sorts of questions including detailed explanations, you should check out my GMAT Sentence Correction book.